U.S. Gearing Up for Major Update on Financial Rescue Plans

A key announcement from the U.S. Treasury Department early next week could change the face of the U.S. financial system with markets expecting revisions to the TARP, and the possible creation of a new body that would buy toxic assets from ailing U.S. banks.

According to CNBC on Monday, U.S. Treasury Secretary Timothy Geithner's announcement early next week could include details about a potential "bad bank" that would buy toxic assets from financial institutions.

The move has been compared to the Resolution Trust Corporation (RTC), which operated between 1989 and 1995 to purchase insolvent assets from financial institutions.

Meanwhile, the Wall Street Journal reported on Tuesday that Geithner will include a foreclosure-prevention support program and perhaps the creation of a non-Treasury entity to manage the Troubled Asset Relief Program (TARP).

The Journal reports that there is discussion among policy-makers over how to improve the public image of the $700-billion TARP.

Measures being considered include tougher restrictions on executive compensation for firms accessing the government funds.

Meanwhile, the U.S. Senate continues to debate a $900 billion fiscal stimulus package after the House passed an $816 billion plan last week with no Republicans voting for the legislation. U.S. President Barack Obama has set a Feb. 16 deadline for the legislation to reach his desk.

By Erik Kevin Franco and edited by Stephen Huebl
©CEP News Ltd. 2009